A Forty-Year Squeeze--Why Universities Must Rethink Endowment Use
Over the past four decades, American higher education has faced increasing financial pressure—pressures that are now reaching a critical point. While recent headlines often focus on political flashpoints, such as policies tied to President Trump, the deeper issue predates any single administration. The root problem is structural, not political: for 40 years, many colleges and universities have failed to adjust to mounting economic realities.
Enrollment is no longer guaranteed. The number of students attending college has declined, especially among traditional-age students, and projections suggest this trend will continue. Families are increasingly questioning the value of a four-year degree as tuition has climbed faster than inflation, outpacing wage growth and pushing affordability out of reach for many. At public institutions, the historical partnership with states has weakened. State funding per student has dropped dramatically in real dollars, shifting the cost burden directly onto students and their families.
Compounding these issues is an escalating expense model. Universities have competed to attract students with expensive amenities—resort-style dormitories, elaborate student centers, and expansive athletic complexes. There is a large argument at schools with vibrant athletics programs that the athletics departments, with tens if not hundreds of million dollars for revenue, are so divorced from the reset of the university that they are more a separate entity than subservient to the University Chancellor/President. These investments may improve the student experience, but they come at a cost. At the same time, inflation has driven up the cost of salaries, benefits, technology, and infrastructure maintenance. The result is a widening gap between revenue and expenses that has become harder to ignore.
The realization—a university can’t be everything to everyone.
In this environment, one option is for universities to revisit how they manage and deploy their financial resources—especially their endowments. Ellen P. Aprill’s recent piece in The Chronicle of Philanthropy, “Endowments Aren’t Blank Checks — but Universities Can Rely on Them More Heavily in Turbulent Times,” brings a timely and thoughtful perspective. The Uniform Prudent Management of Institutional Funds Act (UPMIFA) allows universities to spend prudently from their endowments, even if market downturns reduce their value. Yet many institutions remain hesitant to do so, locked into overly rigid spending rules.
Aprill argues that in times of financial disruption, increased reliance on endowments is both legally permissible and mission-aligned—provided institutions respect donor intent and long-term sustainability. This isn’t a call to spend recklessly. It’s a call for strategic flexibility.
The real issue is not about emergency stopgaps but about recognizing that the financial model of higher education is outdated. Endowments can—and should—play a more active role in bridging gaps, funding innovation, and sustaining institutional missions in a changing landscape.
After 40 years of accumulating pressures, the path forward will require bold adjustments. It’s time for institutions to modernize their financial strategies, embrace prudent use of their resources, and focus on long-term resilience—not tradition.
